Current thinking says everyone should buy a house if they can get a mortgage. So if you don’t already own, go out and buy…right?
Conventional wisdom says perhaps not.
As much as we Realtors love to earn commissions, I’ll be the first to say not everyone should buy.
Here are six situations when buying a home may not be the wisest decision. Many, if not all of these contributed to the decade-old crash in the real estate market. Common sense and good old-fashioned investment principles still apply.
- No Down Payment: Although it is possible to buy a home with no money down (VA loans) or with as little as 3.5% of the purchase price, buyers may find themselves “underwater” with even the slightest downturn in market values.
- Bad Credit: Loans are available to borrowers with less than stellar credit, but they will be lent at higher interest rates leading to an increased chance of default.
- Weak Job Security: Even though a buyer may be employed at the time of purchase if there is even a chance unemployment may soon occur this would not be the time to become a homeowner.
- Employment Relocation: In the past real estate has been a long-term investment. If one tends to move frequently, before equity can be established, losses resulting from a too-soon sale may be significant.
- Unstable Relationships: Purchasing a home with a spouse or significant other is exciting but when the buyers’ relationship is weak or in jeopardy, trouble lurks. Dividing equity, or loss, between parting sellers can be messy.
- Declining Market: The worst time to buy, especially with little in the way of a down payment, is in a declining market. Unsuspecting owners can suddenly find their home is worth less than what is owed on it. Witness the real estate crash of the recent decade.
In conclusion, buying a home wisely is still a long-term proposition. Keep this in mind and purchase only when the time is right.